TaxTMI 
TaxTMI 
2019 (5) TMI 1727
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....on to the firm. 2. Grounds of assessee's cross objection:- "On the facts and in the circumstances of the case the learned AO; Taxability of compensation received on retirement from firm 1. erred in objecting the order of CIT(A) in deleting the addition made by AO under the head long term capital gain of Rs. 4,74,01,448/-, which was amount received by the assessee on retirement from the partnership firm; 2. erred in objecting the order of the CIT(A) on the ground that amount received on retirement from partnership firm includes relinquishment of its rights over the tangible and intangible assets and right for profit of the firm and assessee was compensated with a sum over and above its capital balance, thereby it is chargeable to tax; 3. without prejudice to above, erred objecting the order of CIT(A), wherein the AO has incorrectly mentioned the amount of long term capital gain of Rs. 4,74,01,448 as against addition made by the AO of Rs. 4,46,34,096/-; II. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (A) - I, [CIT(A)] has:- Notional addition on account of deemed rental income on unsold flats/units held by the Appell....
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....ed the same business under the same name and style - M/s. Skoda Construction; as per the agreement, the assessee agreed to release to the continuing partners their respective shares and interest in the said business together with fixed assets, stock in trade, moneys, credits and effects and other assets including tangible and intangible assets; the continuing partners agreed to pay to the assessee such sum as may be standing to their credit in the books of accounts as on 20/2/2011, in full settlement of their claims in the capital, profits and assets of the partnership; the amount payable by the firm to the assessee had been determined by including the amount standing in their credit to their capital account as also their share in the assets of the firm; after retirement, the assessee would have no right, title or interest in the said partnership business nor in the profits and benefits thereof and further the assessee would transfer, release and assure unto the continuing partners all that share of the retiring partner in the partnership business and all its property, assets and credits, goodwill, book debts, fittings and fixtures, benefits of all contracts and orders and all effe....
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....inuing partners their respective shares and interest in the business together with fixed assets, stock in trade, moneys, credits and effects and other assets including tangible and intangible assets. It transferred and released to the continuing partners all its share in the partnership business and all its property. Therefore, this event of retirement from partnership fell very well within the provisions of Sec.2(47) of the Act. (ii) The continuing partners agreed to pay to the retiring partner (assessee) a sum in full settlement of their claims in the capital, profits and assets of the partnership. The assessee received an amount of Rs. 4,74,01,447/- over and above its capital contribution to the firm. Therefore, this amount received by the assessee, which is in excess of its capital, would be subject to tax under the head Capital Gain as per the provisions of Sec.45 of the Act. 4. The AO also held that most of the, case laws relied upon by the assessee pertained to taxation of capital gains in the hands of the firm, on retirement of partner, and, therefore, such decisions were not relevant to the facts of the present case. On the other hand, the AO stated that the dec....
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....ssets . What was given to the retiring partners is cash representing the value of their share in the partnership. No capital asset was transferred on the date of retirement under the deed of retirement deed. In the absence of distribution of capital asset and in the absence of transfer of capital asset in favour of the retiring partners, no profit or gain arose in the hands of the assessee company. Therefore, the question of the present company being assessed under section 45(4) and charging it to tax would not arise. It is relevant to mention that the property belonged to the partnership firm and not to the the partners. The partners only had a share in the partnership asset. What was relinquished by the partners was their share in the partnership firm. Therefore, there is no transfer of a capital asset, as such no capital gains or profit arises in the facts of this case. In that view of the matter, Section 45(4) has no application to the facts of this case. 6. Thereafter he referred to several case laws. 7. The Ld. CIT(A) has concluded as under:- "Similar judgement has been given by the Hon'ble ITAT Pune Bench in case of Riaz A. Saikh dated 29/10/2010 and revenue's appeal ....
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....nce. It was only that assessee retired from the partnership firm. There is no distribution of assets. In the circumstances the compensation received by the assessee has to be held to be capital receipt not chargeable to tax. This is supported by the Honourable Apex Court decision in the case of CIT Vs. V.R. Ringmallu Rahukumar (247 ITR 80). Further to the same effect is order of the honourable Hon'ble Jurisdictional High Court in the case of Riaz A. Saikh (supra). 12. Other case laws referred by the learned counsel of the assessee above also support this proposition. Furthermore, we note that ITAT in the case of Ramal P. Advani in ITA No. 6491 & 6493/Mum/2016 vide order dated 27.8.2018 on similar issue has held referring to these case laws as under : In this connection, the decision of the Hon'ble Bombay High Court in the case of CIT vs. Riyaz A. Sheikh [2014] 41 taxmann.com 455 (Bom) supports the case of the assessee. In this case, it was held that the amount received by an erstwhile partner on his retirement from partnership firm arising on transfer of goodwill is not liable to be taxed as long term capital gain. Similar view was expounded by the Hon'ble Apex Court i....